E.U. Austerity, You Must Be Kidding

[Bigfoot 88]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

 

[Fenton]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

" Austerity ", keep spending and raise taxes in a down economy.

Then listen to the Libs lament the ineffectiveness of Austerity .

 

[Peter Grimm]

"Austerity" is a sham. I always thought Europeans were smarter than to fall for bull like that.

The problems they have in Greece and elsewhere are caused by one thing...... the Euro.

 

[Fenton]

"Austerity" is a sham. I always thought Europeans were smarter than to fall for bull like that.

The problems they have in Greece and elsewhere are caused by one thing...... the Euro.

Greece and other European Countries violated the limitations on deficit spending written into the Maastricht treaty.

You can't blame the Euro for the actions of a Government that kept borrowing and building onto a already unsustainable Public Sector while it targeted its private sector with Higher taxes.

The problem with Greece was Greece.

 

[WallStreetVixen]

Lithuania has actually engaged in austerity.

It actually wasn't that bad...

 

[Peter Grimm]

Greece and other European Countries violated the limitations on deficit spending written into the Maastricht treaty.

You can't blame the Euro for the actions of a Government that kept borrowing and building onto a already unsustainable Public Sector while it targeted its private sector with Higher taxes.

The problem with Greece was Greece.

The problem with Greece is Berlin.

The greeks handcuffed themselves by joining the Euro, where had they control of their own monetary policy, they could have used it to ease their situation.

Every country not named Germany is a fool for having joined the Euro.

 

[MTAtech]

Greece and other European Countries violated the limitations on deficit spending written into the Maastricht treaty.

You can't blame the Euro for the actions of a Government that kept borrowing and building onto a already unsustainable Public Sector while it targeted its private sector with Higher taxes.

The problem with Greece was Greece.

We know, the Republican story is that the euro crisis is all due to the welfare state. the story goes that now that the euro zone economies are growing slowly and have aging population, the welfare state is no longer sustainable. If the narrative that the problem is an excessive welfare state, the countries with the most generous welfare states would be doing poorly. But what do we find? The ones with generous social programs appear to be doing just fine. If we just take the measure of spending relative to GDP, the leaders would be countries like Sweden, France and Denmark, all of which are surviving the crisis reasonably well. None of the crisis countries rate near the top of the list and Spain is an outlier in Europe for having a much lower than average share of government spending in GDP.

 

[Northern Light]

Would much rather live in a system where government expenditures mostly go back into spending on the health and well being of the population (Europe) than government expenditures being on corporate welfare while the public suffers a great dumbing down (United States).

 

[Gimmesometruth]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

What a strange posting from CATO. Austerity is a change in spending over time and looking at one data point is dumb to say the least, a total lack of understanding is closer to the truth.


The result is below. It is what I would have expected: the bigger the structural tightening, the larger the fall in GDP. The estimated fit is fairly good for this sort of calculation. Every percentage point of structural fiscal tightening is estimated to lower GDP by 1.5 per cent of its 2008 level. So the 8 percentage points of structural fiscal tightening in Greece lowered its GDP by 12 per cent.

In all, then, of the fifteen countries, only five show a surprising relationship between fiscal tightening and economic growth and all but one of these (Malta) are only small surprises.

I would add that the fiscal contractions in Greece and Ireland have been very large indeed. It is no surprise that these economies have contracted sharply.

In all, there is no evidence here that large fiscal contractions bring benefits to confidence and growth that offset the direct effects of the contractions. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions.
http://blogs.ft.com/martin-wolf-exchange/2012/04/27/the-impact-of-fiscal-austerity-in-the-eurozone/

 

[PeteEU]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

You are forgetting one important thing on that list... most if not all those countries but the US has UHC... which means you have to add 17% to the US number to make it even comparable.

 

[PeteEU]

What a strange posting from CATO. Austerity is a change in spending over time and looking at one data point is dumb to say the least, a total lack of understanding is closer to the truth.

Not really, CATO is a far right wing economic mouthpiece that lives of miss-information. I use to respect them but when one of their guys was on TV saying that France was a hell hole with massive unemployment and economic decline, then I lost all confidence in them. Why? Because at the time, the US had higher deficits, higher unemployment and more debt... but that was totally ignored in what he was talking about, and by the hosts on CNBC. Since then, I have seen highly suspect "studies" coming out of the CATO institute, often leaning to the GOP and Neo Cons and far from economic, historical and political reality.

 

[PeteEU]

The problem with Greece is Berlin.

No the problem with Greece was Greece. Their pathetic tax system and corruption put them in the hole they were in.

The greeks handcuffed themselves by joining the Euro, where had they control of their own monetary policy, they could have used it to ease their situation.

Horse****. If they had their own currency then they would just do as they had always done.. devalue.. pissing in your pants to get warm mentality. The Euro exposed the problem and they are finally now dealing with it.

Every country not named Germany is a fool for having joined the Euro.

So every US state is a fool for joining the dollar? every UK province is a fool for having the pound? How about every province in China and Russia? Fools? The Euro may not be perfect but it is better than the alternative where billions were wasted by consumers on currency conversions and companies cheating consumers on a grand scale. I can see it still happening in Denmark, a country with its own currency, but where products are cheaper in Germany when you take away the taxes. Why is that? Oh yea, because most people cant or dont do the math and expose the price difference and ask the hard questions, so companies can get away with it.

 

[Rainman05]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

Yes, austerity is a lie.
You caught us with our pants down.

Though not really. Because... lets apply logic.

You notice the huge discrepancies?
Spain who has huge unemployment, 45% of GDP.
Denmark who has very little unemployment, 57% of GDP.

How is this possible? Is it even logical? makes 0 sense, right?
Right.
Because you don't judge EU member countries on the same level with the USA because there is difference in how they're organized. It's impossible to judge cleanly.

Lets take a big state like California.
it has a gdp of 2300 bil $ and it's budget is 450bil$ which is aprox 20%.
California State And Local Spending for 2015 - Charts
This is what it spends it on.
Add that to the 38% of the USA federal spending. And it's the same everywhere.
Compare States Growth And Debt for 2015 - Charts
Arkansas spends 1/5th of the gdp in its budget.
Alaska, again, gdp of 60bil, spends about 15bil on state budget. 1/5th = 20%.
same on and same on for every state.

So the US spends 38% on federal budget + 20% on state budget for every state. So actually, the USA's real budget is about 60% of the GDP.
So with this in mind, are you even trying USA?

=======

now why doesn't it make sense what I wrote, how could spain spend less than denmark despite huge unemployment. Well, it's because austerity is implemented. Denmark doesn't have to adopt austerity measures coz it has a balanced budget. Spain didn't, spain had to cut. Ofc, this isn't the case everywhere, each country is special.

 

[Fenton]

We know, the Republican story is that the euro crisis is all due to the welfare state. the story goes that now that the euro zone economies are growing slowly and have aging population, the welfare state is no longer sustainable. If the narrative that the problem is an excessive welfare state, the countries with the most generous welfare states would be doing poorly. But what do we find? The ones with generous social programs appear to be doing just fine. If we just take the measure of spending relative to GDP, the leaders would be countries like Sweden, France and Denmark, all of which are surviving the crisis reasonably well. None of the crisis countries rate near the top of the list and Spain is an outlier in Europe for having a much lower than average share of government spending in GDP.

Welfare state ?

Are you kidding me ? So Greece and Spain should have kept spending and borrowing while their bonds achieved junk status ?

 

[MTAtech]

Welfare state ?

Are you kidding me ? So Greece and Spain should have kept spending and borrowing while their bonds achieved junk status ?

The point I was making is that the narrative that European countries had financial problems because of social spending is all wrong. The most generous social spenders had no difficulty. Greece's problem was due to the fact that they don't have their own currency, which would have been devalued, making their labor and products more competitive.

 

[Fenton]

The point I was making is that the narrative that European countries had financial problems because of social spending is all wrong. The most generous social spenders had no difficulty. Greece's problem was due to the fact that they don't have their own currency, which would have been devalued, making their labor and products more competitive.

How can anyone be so dishonest ?

Greece's problem WAS GREECE. Massive corruption and the ultimate Progressive idea of a Public Sector economy with full employment funded by massive deficit spending tanked Greece.

Had they had their own currency they would have devalued it down to nothing while their junk bonds poisoned banks throughout Europe.

Greece targeted their private sector including exports with higher taxes and excessive regulations.

Greece was the ultimate example of a Progressive wet dream run amok.

 

[JohnfrmClevelan]

How can anyone be so dishonest ?

Greece's problem WAS GREECE. Massive corruption and the ultimate Progressive idea of a Public Sector economy with full employment funded by massive deficit spending tanked Greece.

Got a source for that claim? No? Didn't think so.

There is nothing more pathetic than peddling the same lie, over and over, even after you have been caught doing so.

How can anyone be so dishonest?

 

[MTAtech]

How can anyone be so dishonest ?

Greece's problem WAS GREECE. Massive corruption and the ultimate Progressive idea of a Public Sector economy with full employment funded by massive deficit spending tanked Greece.

Had they had their own currency they would have devalued it down to nothing while their junk bonds poisoned banks throughout Europe.

Greece targeted their private sector including exports with higher taxes and excessive regulations.

Greece was the ultimate example of a Progressive wet dream run amok.

“We knew at the fund from the very beginning that this program was impossible to be implemented because we didn’t have any — any — successful example,” said Panagiotis Roumeliotis, a vice chairman at Piraeus Bank and a former finance minister who until January was Greece’s representative to the International Monetary Fund. Because Greece is in the euro zone, he noted, the nation cannot devalue its currency to help improve its competitiveness as other countries subject to I.M.F. interventions almost always are encouraged to do. LINK

Greece's lack of competitiveness is a recent development, caused by massive post-euro inflows of capital that raised costs and prices. And that’s the kind of thing that currency devaluations can cure. But it can't devalue its currency because it uses the Euro.

Countries on the euro are stuck with a severe competitiveness problem that can only be resolved with grinding deflation. That’s why America isn’t Greece.

 

[Blue_State]

/snip pissing in your pants to get warm mentality.
/snip

Thank you for that smile. I haven't heard that in a long time.

 

[Vern]

E.U. Austerity, You Must Be Kidding | Cato @ Liberty

serious question Bigfoot. As Gimmesometruth points out austerity is not really defined by one data point, do you feel the Cato "editorial" was intentionally misleading?

 

[PeteEU]

How can anyone be so dishonest ?

Greece's problem WAS GREECE. Massive corruption

So far so good.. but then you had to go and do this.

and the ultimate Progressive idea of a Public Sector economy with full employment funded by massive deficit spending tanked Greece.

Greece has never had full employment and the policy was never any where near this, both by the left wing parties and the right wing parties. Greece's problem was very simple, the tax income could not meet the cost in running the state. Now one could say that then cut the state, but that would never have solved the problem because the problem was a fundamental issue with how taxes were viewed and collected in Greece.

The difference between Greece and the US on their views on taxes and what the state should do are not that different. What is different is the effectiveness of their tax laws and collecting authorities. In the US, the IRS is relatively effective in collecting taxes.. in Greece, the equivalent authority is a tip box in the corner of an office.

Had they had their own currency they would have devalued it down to nothing while their junk bonds poisoned banks throughout Europe.

Which is what they have been doing (along with Italy) for generations and it still would not have solved the fundamental problem of that economy. Devaluation is a band-aid on a severed limb, pissing in your pants to get warm type situation.

Greece targeted their private sector including exports with higher taxes and excessive regulations.

LOL no it did not. Far far from it! Wealthy people and corporations paid next to no taxes and were massive tax dodgers. Regulation wise it was up to who you could bribe, and since most private companies were either owned by government employees or politicians, then it was not that hard. In fact most of Greece´s biggest "companies", like ship yards, telecoms, airlines were all still owned by the state and that was part of the problem. There was no real privatization going in the country despite not only EU law saying it had to happen, but the fact that Greece´s own laws and regulations said they had to happen. Due to incompetence and corruption these privatizations simply never happened.

Greece was the ultimate example of a Progressive wet dream run amok.

Utter bull****. It is the ultimate example of what happens with unbridled capitalism and greed... the few control everything and let the rest rot.

 

[PeteEU]

Welfare state ?

Are you kidding me ? So Greece and Spain should have kept spending and borrowing while their bonds achieved junk status ?

This ultimately shows you have no idea what you are talking about.

Comparing Greece and Spain is like comparing oil and water.

Spain´s problem was not overspending. In fact Spain when the crisis started not only had low debt, but its public spending was relative to GDP just slightly higher than the US, and far far behind the rest of Europe. What put Spain in the hole was a massive building bubble that punctured due to the recklessness coming out of the US. Collapsing tax income meant that suddenly virtually overnight, Spain went from a surplus (yes you did read right), to a massive deficit in under 2 years. Add to that a general inflexible labor market and you have a cocktail for disaster as we have seen.

Greece had been secretly running up debt, lying about it with the help of American banks (same banks who were behind the US sub-prime crisis basically) and running deficits thanks to a pathetic tax system.

 

[MTAtech]

...
Devaluation is a band-aid on a severed limb, pissing in your pants to get warm type situation.
...

Actually, devaluation is a corrective mechanism. Had Greece had its own currency, it would have traded lower on world markets. That would have made Greece products and labor cheaper in comparison to other nations and encouraged money to flow into Greece. Since Greece is also a tourist spot, it would have encouraged foreign travelers who would have perceived a bargain traveling to Greece. All of that would have resulted in a rebound without the suffering deflation brings.

 

[joG]

"Austerity" is a sham. I always thought Europeans were smarter than to fall for bull like that.

The problems they have in Greece and elsewhere are caused by one thing...... the Euro.

That is astoundingly close to the whole truth.

 

[PeteEU]

Actually, devaluation is a corrective mechanism. Had Greece had its own currency, it would have traded lower on world markets. That would have made Greece products and labor cheaper in comparison to other nations and encouraged money to flow into Greece. Since Greece is also a tourist spot, it would have encouraged foreign travelers who would have perceived a bargain traveling to Greece. All of that would have resulted in a rebound without the suffering deflation brings.

And it would still have not changed the fundamental problem of a pathetic tax collecting system and other structural problems in the economy. They have been doing this crap for generations after all.. devaluing when things got tough. Being in the Euro prevented this and forced them to face up to the fundamental problems in their society.. yes it was painful and many hate it, but frankly it was needed.